2024-001 Allegations of Misuse of Funds
Information on the Federal Program(s):
United States Agency for International Development
Assistance Listing Number: 98.001
Assistance Listing Name: USAID Foreign Assistance for Programs Overseas
Award Number(s):
Direct Award Numbers: Criteria: §200.516(a) Audit findings that involve known or suspected fraud are required to be reported by the auditor.
Condition: In 2024, in performing their core duties and position responsibilities aligned with role assignments, Pact employees detected, resolved, and reported instances of financial misconduct occurring during the implementation of federally funded programs; no incidents resulted in a loss to the U.S. Government. These incidents were promptly reported by Pact to the U.S. Office of the Inspector General of the related federal granting agency.
• In the Tanzania office:
o A staff member more than likely tried to inappropriately influence a subgrantee’s vendor selection process in exchange for kickbacks. Pact took appropriate disciplinary action. Pact did not find evidence of kickbacks. There was no financial impact to USAID Award 7200AA19CA00006.
o Pact determined that employees of a subawardee for USAID Cooperative Agreement No.: 7200AA19CA00006 submitted false travel expenses (TSH 3,103,000 / est. USD $1,170), which were refunded to Pact. Pact rejected another TSH 362,000 / est. USD $136 in falsified travel expenses. In addition, Pact determined the subawardee ran a compromised procurement process resulting in the selection of inappropriate vendors and was missing project supplies and materials. Pact withheld these funds (TSH 11,627,162 / est. USD $4,395) from the subgrantee, resulting in no loss to the USG or to Pact. Pact terminated the subaward.
• A consultant for USAID Cooperative Agreement No.: 72066722LA00002 implemented out of Pact’s Kenya office submitted a falsified hotel receipt. The consultant was not reimbursed for the false claim amount of USD $1,596 and there was no financial impact to the USG or to Pact. The consultant agreement was terminated.
• A subawardee under USAID Leader with Associate Awards No. 7200AA21LE00006 in Sri Lanka reported potential misuse of funds within their own organization. An audit by the subawardee and internal review by Pact determined that there was no financial impact to the USG or to Pact. To mitigate further risk, Pact terminated the subaward.
• In the Zambia office:
o An employee for USAID Contract No.: 72061123C00003 misused a company vehicle for personal use. The employee was terminated and the related costs (ZMK 8,542 / est USD $360) were withheld from their final payment. There was no financial impact to the USG or to Pact.
o A staff member working on USAID Contract No.: 72061123C00003 submitted a falsified hotel receipt. The fraudulently claimed amount (ZMK 200 / USD est $8) was voluntarily recovered during the employee’s termination process. There was no financial impact to the USG or to Pact.
Pact currently has two ongoing investigations related to U.S. Federal funding, where the full facts, circumstances, and potential impacts of the misused of funds are still under review and have not yet been fully determined.
Cause: Individuals attempted to bypass Pact’s established internal controls to prevent misuse of funds.
Effect or potential effect: Unallowable expenses could be reimbursed from U.S. Government awards.
Questioned Costs: None.
Context: These conditions were uncovered through Pact’s internal processes and were reported to us while conducting the single audit for the year ended September 30, 2024.
Recommendation: We recommend management continue to utilize and communicate to all employees, consultants, contractors and subrecipients its ethics reporting hotline. We also recommend the continual monitoring and strengthening, as considered necessary, of other policies and procedures related to the prevention of misuse of federal funds, including the establishment of internal controls related to the use of Pact vehicles.
Views of Responsible Officials: Pact is committed to superior compliance with applicable laws, regulations, and agency requirements and has a zero-tolerance policy for fraud. As an international development non-profit organization, Pact implements projects in high-risk operating environments—such as Tanzania, Zambia, Kenya, and other foreign countries—where there is a high prevalence of potential fraud.
To prevent, mitigate and minimize incidents of fraud in these environments while ensuring delivery of results, Pact employs a comprehensive four-pronged approach that includes: (1) strong internal controls, (2) robust compliance requirements, (3) ongoing employee training, and (4) the promotion of a culture rooted in ethics, integrity, and transparency. These measures are supported by standardized tools for risk assessments, monitoring checklists, and toolkits as well as anonymous reporting mechanisms. In their day-to-day activities, Pact staff in country offices review potential procurements, transactions, vendor payments, and staff reimbursements for errors as well as for potential instances of fraud. In addition, project teams perform routine risk assessments and monitoring activities to detect irregularities.
Due to these ingrained policies and practices, Pact’s employees, in performing their regular responsibilities, identified, reported, and swiftly resolved the above incidents, preventing any financial impact to the USG. As a result, there were no instances of disallowed costs. The early identification, resolution, and reporting of these incidents demonstrate that Pact’s internal controls are well-designed and effectively implemented by staff worldwide. These controls provide reasonable assurance that Pact’s financial reporting is reliable, its operations are effective and efficient, and that the organization is in compliance with applicable laws and regulations.